To escape the middle-income trap, Vietnam needs a new development model

Economist Huynh Thanh Dien believes that Vietnam has not yet fallen into the middle-income trap because it has not reached the threshold. However, if it continues with its current model, the likelihood of falling into the same trajectory as Thailand and the Philippines is very high. The period 2026-2030 is considered a "strategic window" for Vietnam to break through to the group of countries with modern industries and avoid falling into the middle-income trap. Speaking with TheLEADER, Dr. Huynh Thanh Dien, an economic expert, emphasized that the new growth driver does not lie in the slogan "technology - innovation," but in the ability to restructure institutions, open up development space, activate the private sector, attract capital into production, and participate in high value-added stages in the global supply chain. According to him, for the past 20 years, Vietnam has relied heavily on foreign direct investment (FDI) as a driver of growth, primarily in assembly, processing, and manufacturing on demand, taking advantage of cheap labor and land. This model is suitable for the take-off phase but is insufficient to generate gradually increasing marginal productivity, leading to limitations in development. From there, the expert emphasized that Vietnam has not yet fallen into the middle-income trap, but the risk is real. This is because the middle-income trap does not occur when a country experiences slow growth, but when growth becomes "untransformed" after the initial industrialization phase. In Southeast Asia, at least four economies have been stuck in this trap for more than a decade. "Vietnam hasn't fallen into the trap yet, because it hasn't reached the threshold. But if it continues with the current model, the likelihood of falling into the same orbit as Thailand and the Philippines is very high," he observed.